Nowadays you can do almost anything online, and that includes paying your taxes too! The US Department of Treasury has set up the Electronic Federal Tax Payment System (EFTPS), a free service to taxpayers who wish to pay their taxes to the IRS online.
Enrollment in EFTPS
Enrolling is a fairly straightforward procedure. You can either do it online or by phone. Once you have gone through the prompts and enrolled, you will receive a PIN number which you will use to log in and begin scheduling payments. Expats and other international taxpayers can also enroll with EFTPS, making it more convenient than having to mail tax forms from the other side of the world.
Scheduled Payments with EFTPS
While EFTPS is a convenient system, it is still the taxpayer’s responsibility to set up and initiate tax payments properly. Tax payments must be submitted to EFTPS by 8PM EST at least one calendar day before the tax due date. Taxpayers also need to make sure the appropriate funds are in the bank account designated for EFTPS payments. Taxpayers can check the status of payments made, schedule payments up to 365 days in advance, and can even schedule regular payments as weekly, biweekly, monthly, or quarterly payments. It is a fairly useful service for corporations who need to provide quarterly estimated payments. Payments can be canceled as well, however must do so by 11:59PM EST at least two business days before the tax due date.
If you have a payroll service that makes tax payments on your company’s behalf, you can still enroll with EFTPS. It is a useful way to make sure tax payments have been processed. It also provides some flexibility in case you may have to change payroll service companies in the future and will still have access to EFTPS.
With the convenience of online tax payments, business owners can save time and focus on other matters. Of course, the preparation of the taxes can be another issue, unless you have a proper supporting team for that as well. Which is where we can come in. MiklosCPA helps businesses with their back-room accounting and taxation needs, such as setting up EFTPS for your business and preparing the appropriate quarterly payments. If you would like to learn more about our services, please contact us. Also, follow us on our social media pages for future tax tip articles like this one!
Nonprofit organizations benefit the communities and people they serve. Many kinds of nonprofits exist to support numerous causes, from building homes for veterans to organizing comic book conventions for fans. Nonprofits also hold the advantage of exemption from federal income tax. However, to reap this benefit, nonprofit organizations must apply with the IRS in order to properly qualify as a 501c nonprofit corporation.
The kind of nonprofit you intend to establish will determine what form you will need to use to submit tot he IRS:
Form 1023 – Charities & service organizations like churches and hospitals Form 1024 – ‘Professional Groups’ like trusts, business networks, and social organizations like fraternities
Copies of documents, like Employer Identification Number (EIN), organization charter, mission statement, and financial data must be attached with your application. The IRS may reject the initial application if any information is not properly presented or is missing. They may send the application back or may issue a letter requesting additional information.
After their processing and review, the IRS will issue a letter to you determining if your organization qualifies as a tax-exempt non-profit. Employment tax returns for exempt organizations
Nonprofit organizations may be exempt from federal income tax, but they may still need to pay employment taxes, (e.g. FICA, FUTA) unless the employer may be specifically exempt by law from those taxes. For example, ministers are generally exempt from FICA and FUTA taxes. Qualified church-controlled organizations can file for an exemption from FICA taxes with form 8274.Under this exemption, all employee’s individual taxes will have to be reported in the same manner as a self-employment tax. For example:
A minister establishes a small church that serves the San Gabriel Valley area. In order to help with managing day-to-day operations, he has to hire an office manager and an assistant. One of the tenets of that church’s faith vehemently disagrees with the end results of Social Security. While the minister himself is exempt from FICA and FUTA taxes automatically by law, his staff is still subject to FICA taxes. The office manager submits form 8274 to the IRS to have the staff of this church exempt from FICA taxes. They will now need to report their earnings as if it were self-employment earnings.
Follow us on our MiklosCPA social media pages for future tax tip and other accounting articles we post periodically. MiklosCPA is a California-based accounting and tax firm that supports business organizations with their accounting and tax needs, from back room bookkeeping to tax advisory for complex tax questions. We utilize a cloud-based accounting service combined with personal, regular communications. If you are interested in learning more about us, contact us.
Nonprofits have the distinct advantage of exemption from federal income tax, but nonprofits still must regularly file like any organization in order to maintain that status!
Just like any other organization that actively participates in the ecosystem of our economy, annual filings with the IRS are required. In the case of nonprofits, the rules are a bit different than with a regular business.
Aside from some very specific exceptions, all nonprofit organizations with tax-exempt status must annually file an “Annual Exempt Organization Return” Form, otherwise known as Form 990. Depending on your organization’s financial activity, your non-profit will have to complete Form 990 or its related versions, such as Form 990-EZ. Filing is due by the 15th day of the 5th month after the end of your nonprofit’s fiscal year. Let’s take an example:
“Homies for Harambe” is a nonprofit that provides moving services for senior citizens in the Orange County area. Homies for Harambe established themselves officially on October 13, 2015. Their fiscal year ends on October 13, 2016. Therefore, they have until March 28, 2017 to file their first annual return. They initially try to complete the Form 990, but they realize they are very small in their first year and had less than $50k in total revenue, so they need to use Form 990-EZ for their filing.
Unrelated business income tax
A nonprofit has a specifically stated purpose or mission, such as postsecondary education or providing pantry food for impoverished families. However, as the organization grows, it may expand with other operations. Tax-exempt organizations with substantial income unrelated to its main nonprofit purpose must use a form 990-W to figure out estimated tax payments and file a form 990-T. For example:
St. Augustine Preparatory is a religious, private middle school that serves the San Gabriel Valley area. They also have a tutoring unit that focuses on specific subjects like math and science. This service is available to the public and charges by the hour. The revenue the school makes from tutoring significantly helps their operating costs, but is seen as being outside their specific purpose as a religious education nonprofit. The tutoring income would be considered an unrelated business income and so they would need to file a form 990-T.
Misc rulesto consider Tax-exempt organizations that go through legal structural changes, such as transitioning from a partnership to corporation, must file an entirely new exemption application to establish that the new legal entity qualifies for the exemption.
If your organization is changing its internal regulations or has significantly new services, you simply have to report it on your Form 990 to be filed. Changing your accounting period will require filing form 1128 (the one used by all organizations to request a change in accounting period) in addition to Form 990.
Preparing needed filings for businesses and nonprofits alike may sometimes get overwhelming. Having a supporting team for such needs is something we here at MiklosCPA can cover! We are a California-based firm focused on helping businesses with their accounting and tax needs using current cloud-based services with personalized, regular communications. If you are interested in learning about our services, contact us! If you found this article useful, follow us on our social media pages for future updates.
Thinking about donating to a nonprofit? Here’s something to think about: your donation may be non-deductible.
501c3s may be the most common nonprofit and donations to them are tax-deductible. There are numerous other nonprofit “types” designated under Section 501 in the US tax code that can qualify for federal income tax-exempt status. However, not all of them are considered tax-deductible nonprofits.
Some of these organizations are:
501c4 – Civic leagues and social welfare organizations (e.g., local employee associations, Sierra Club)
501c5 – Labor, Agricultural and horticultural organizations (e.g., Horse clubs, LA County Fair Association)
501c6 – Business Leagues (e.g., Chambers of commerce, Better Business Bureau, Los Angeles Tourism & Convention Board. Interesting fact: the NFL qualified as a 501c6 for many years until recent media attention on the NFL’s income and place as the most watched US sport drove them to drop the designation.)
501c7 –Social & recreational clubs (e.g. various fraternities like Sigma Phi Epsilon)
Nondeductible status doesn’t always apply across the board for a certain kind of 501c. For example, donations made to some 501c4s, such as war veteran groups and volunteer firefighter organizations, can be tax deductible, but donations made to a 501c4 like Sierra Club will not be tax deductible.
If you may be considering contributing to a nonprofit in the hopes of a tax-deduction, confirm if your donations are tax-deductible with their 501c designation.Otherwise you may unpleasantly learn at the end of the year that your monthly monetary donations won’t ease your tax burden.
Having a trusted adviser assist with research on nonprofits is always helpful. As a business owner, you may not always have the time to thoroughly check if the nonprofit you are considering donating is a tax-deductible nonprofit. That, and many other needs are something we can certainly help with! MiklosCPA is an accounting and tax advisory firm that helps businesses with their accounting and tax needs so that its leadership can focus on the most important part, growing the business! If you would like to learn more about our services, contact us! If you found this article useful, follow us on our social media pages for future updates, and share this with friends and associates.
More specifically, they are all seen in the eyes of the IRS as Section 501c3 nonprofits. 501c3s are the most common type of nonprofit because not only are they exempt from the federal income tax, but donations made to the nonprofit are tax-deductible for donors. Tax-deductible donations are a great incentive for individuals to give generously to nonprofits.
Ever thought of starting one? Naturally, there are some filing procedures and specific rules a 501c3 nonprofit must meet to establish and maintain this designation.
To qualify for 501c3 nonprofit status, the organization’s purpose must fall under one or more of these categories:
Religious (local Churches, food banks like Second Harvest of Orange County)
Charitable (nonprofits like Goodwill Intl., United Way, and UNICEF)
Scientific (e.g. California Science Center)
Testing for Public Safety (publications like Consumer Reports)
Literary organizations (associations like American Library Association)
Fostering amateur sports competitions (youth sports leagues like AYSO)
Prevention of cruelty to children or animals (e.g. SPCA-LA, Dogs Without Borders)
As an organization, they need to be a corporation, trust, association, or foundation. Sole proprietorships or partnerships cannot qualify.
Some things to consider:
Generally, all donations that a nonprofit receives are tax-deductible for the donor. However in some circumstances, if the donor receives something of value in exchange for the donation, the donation may not be considered tax-deductible.
The 501c3 organization must not substantially attempt to influence legislation or participate in a political campaign for or against any candidate running for public office. Doing so will risk the exemption status being taken away. However, certain voter education activities conducted in a nonpartisan manner may be acceptable.
Nonprofits are a great way to support your community. Tax-exempt and tax-deductible benefits add a sweet incentive for donors to line up and support your nonprofit organization.Do you have a charitable cause that you want to start?MiklosCPA can help you get on the right path! We are well versed in business planning and tax knowledge serving the Greater Los Angeles area. Connect with us on our social media pages for future tax tip articles, or if you are interested in learning more about our services for businesses, send us an inquiry.
The health of the construction industry often echoes the health of the larger economy, be it in a region like Orange County and new housing tracts, or at the national level with things like grand transportation projects linking regions.
The industry contains numerous regional small to midsized firms competing with larger national corporations for private and government construction contracts of varying values.
Construction businesses hold much potential for profitability, but the industry goes through severe boom and bust cycles. There also are some complicated rules which the IRS touches upon in Publication 3780, a tax guide geared towards small construction businesses.
Accounting Methods
Accounting methods are the rules determined in reporting income and expenses. The two most common ones to businesses are the cash and accrual methods. As the name implies, the cash methodreports income and expenses as the cash is received. Put simply, the accrual methodreports income and expenses as they are earned and not when the cash for it is paid. Generally, construction businesses use the accrual method due to the complexity of contracts and IRS rules requiring C-corporations and certain firms like mining firms to only use the accrual method. Of course, there are some exceptions such as small construction firms taking in an average gross revenue of $10M in a year able to use the cash method if they so choose.
Indirect Costs for Long Term Contracts and Accounting Methods
Indirect job costs such as repairs and depreciation on construction equipment are required to be allocated to long term (1 year or more) contracts. Indirect job cost allocation depends on the type of cost and the type of method used to account for long term contracts. Certain costs are not allowable to be allocated as indirect job costs to long term contracts, such as advertising expenses and expenses related to unsuccessful bids.
GAAP allows for two kinds of long term contract accounting methods, percentage-of-completion method and completed-contract method. As the name implies, percentage-of-completion reports expenses and revenues according to the percentage of a completion of a project. Completed contract method reports expenses and revenues only when the contract is fulfilled. Generally, construction companies use the percentage-of-completion method and allocate indirect costs to their long term contracts as needed.
Independent Contractor or Employee?
Another common issue that arises for small construction firms is the proper classifications of independent contractors and employees. Three factors are considered when determining whether they are an employee or an independentcontractor:
Control over the work done – If you can only control the outcome of the work to bedone and not how the work is to be carried out, then that worker is likely an independent contractor and not an employee.
Financial control – Is the worker paid with a possibility of profit or loss to the worker for a job to be done? Are their expenses not reimbursed by the firm? Then they may most likely be an independent contractor.
Relationship of parties – Does the worker receive some kind of employer benefit? Or are they only paid on a specific job based on an agreement for work to be done? Workers who are compensated only for a specific job and receive no other benefits such as health insurance are independent contractors.
This is just a general overview of common tax issues small construction businesses may face. Each case will be different and specific concerns will emerge. For those concerns, we are more than capable to assist in those needs. MiklosCPA is a Los Angeles-area accounting firm with a focus on businesses and their tax and accounting functions. We provide a service that uses current cloud-based technologies and personalized communications to help your firm manage the accounting so that you can charge ahead on growing the business. If you are interested in learning more about our services, please contact us!
MiklosCPA is a top-rated cloud-based Certified Public Accounting firm in Los Angeles, Orange County, California serving small businesses and start-ups.
